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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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A company should recognize revenue when

  1. a. the revenue is earned
  2. b. die contract is signed
  3. c. the seller satisfies the performance obligation
  4. d. the consideration is received

To determine

State the recognition of revenue by Companies.

Explanation

Revenue recognition by Companies: Companies must recognise revenues to represent the “Transmission of promised goods and services to customers in an amount that reflects the consideration” to which the entity anticipates to be authorized in exchange for those good and services.

Justification for the incorrect option a:

Company does not recognize revenue when the “revenue is earned”. Therefore, it is an incorrect option.

Justification for the incorrect option b:

Company does not recognize revenue when the “contract is signed”. Therefore, it is an incorrect option.

Justification for the incorrect option d:

Company does not recognize revenue when the consideration is received”. Therefore, it is an incorrect option...

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